Labour, equipment and productivity pricing

Labour is the most uncertain cost in a contractor's own work. Material prices can be locked in with quotes and equipment rates are published, but how many hours a crew will need depends on the crew, the foreman, the weather, the design, the site and dozens of other factors. CON-200 introduced the labour pricing equation, labour burden, crews and productivity data, and owning and operating costs for equipment. This lesson applies those ideas to a complete bid: building loaded labour rates from current statutory costs, balancing crews, adjusting productivity for the conditions of a particular project, accounting for overtime, shift work and learning, and allocating equipment over the schedule rather than item by item.

The loaded labour rate, revisited

A worker's base wage is only the starting point. The contractor also pays statutory payroll costs, workers' compensation premiums, vacation and holiday pay, and, on unionized work, negotiated benefits such as health and welfare, pension and training funds. Together these are called labour burden. Some components are percentages of wages without limit; others stop once a worker's earnings reach an annual ceiling, so the effective burden percentage depends on how much the worker earns in a year.

For 2026, the main federal payroll costs for an employer outside Quebec are the Canada Pension Plan (CPP) and Employment Insurance (EI) premiums. The employer pays CPP at 5.95 % on earnings between the $3,500 basic exemption and the year's maximum pensionable earnings (YMPE) of $74,600, plus a second tier (CPP2) at 4.00 % on earnings between $74,600 and $85,000. The employer's EI premium is 1.4 times the employee rate of 1.63 %, or 2.282 %, on insurable earnings up to $68,900. Quebec employers pay into the Quebec Pension Plan and Quebec Parental Insurance Plan instead, with different rates. Provincial workers' compensation premiums are set per $100 of insurable earnings by rate group and vary widely by trade and province; employment standards require vacation pay (at least 4 % in most provinces) and pay for public holidays.

# Effective 2026 employer burden for a carpenter in Ontario (illustrative wage and WSIB rate)
wage, hours = 45.00, 1_800              # $ per hour, paid hours per year
earn = wage * hours
cpp  = 0.0595 * (min(earn, 74_600) - 3_500)
cpp2 = 0.04 * max(0, min(earn, 85_000) - 74_600)
ei   = 0.0163 * 1.4 * min(earn, 68_900)
vac  = 0.04 * earn                      # vacation pay
hol  = 0.036 * earn                     # public holiday pay, about 9 days (assumed)
wsib = 4.50 / 100 * earn                # $ per $100 of insurable earnings (illustrative)
benefits = 9.80 * hours                 # union health, pension and training ($/h, illustrative)
parts = {"CPP": cpp, "CPP2": cpp2, "EI": ei, "Vacation": vac, "Holidays": hol,
         "WSIB": wsib, "Benefits": benefits}
for k, v in parts.items():
    print(f"{k:9s} ${v:>9,.0f}  {v / earn:6.2%}")
total = sum(parts.values())
print(f"Burden   ${total:>9,.0f}  {total / earn:6.2%}")
print(f"Loaded rate ${wage + total / hours:.2f} per paid hour")

CPP       $    4,230   5.22%
CPP2      $      256   0.32%
EI        $    1,572   1.94%
Vacation  $    3,240   4.00%
Holidays  $    2,916   3.60%
WSIB      $    3,645   4.50%
Benefits  $   17,640  21.78%
Burden   $   33,500  41.36%
Loaded rate $63.61 per paid hour

The output shows that burden adds roughly 40 to 50 % to the base wage for this worker, and that the largest single item is the negotiated benefit package; workers' compensation and the statutory payroll costs come next. Because some items stop at annual ceilings, burden as a percentage is higher early in the year and for lower-paid workers. Estimators normally use an average burden percentage for each trade, updated every January and whenever collective agreements or compensation rates change. Using last year's burden on a bid submitted in February is a classic source of small but certain losses.

Crews and crew balance

A crew rate combines the loaded rates of the workers who normally work together, and sometimes their equipment, into a single cost per crew-hour. The crew must be balanced: the mix of trades and labourers should keep everyone productive. A formwork crew with too few labourers stripping and moving forms leaves carpenters waiting; one with too many leaves labourers idle. Crew composition also affects supervision: a foreman can typically direct six to ten workers effectively, depending on the work.

Adjusting productivity for the project

Published productivity data and a firm's own history describe average conditions. Every project differs, and the estimator adjusts base productivity with factors that reflect the specific job. Typical adjustments include the following.

Factors should be applied thoughtfully, not stacked mechanically. A project that is congested, in winter and in an occupied building does not necessarily take 75 % more hours; some effects overlap. The safest practice is to adjust productivity for the specific activities affected, write down the reasons, and compare the resulting hours with completed projects of similar character.

Overtime, shift work and schedule compression

When a schedule is compressed, contractors work longer days, add shifts or add workers. Each option costs more than the hours suggest. Overtime is paid at a premium, typically time and a half or double time depending on the hours, the day and the collective agreement or employment standards. Productivity also falls on sustained overtime because of fatigue, and the loss grows with the number of consecutive weeks. Studies of mechanical and electrical work have reported losses of roughly 10 to 25 % after several weeks of 50- to 60-hour weeks; the figures vary, so estimators should treat them as indicative and rely on their own experience.

Shift work avoids some of the fatigue but adds shift premiums, lighting, extra supervision and coordination. Adding workers to a fixed area eventually causes crowding, which reduces productivity per worker. All of these effects are why schedule acceleration is expensive and why a bid with an unrealistic schedule often hides a loss.

Learning on repetitive work

When a crew repeats the same task, such as forming identical floors, installing identical bathroom pods or framing identical units, it usually gets faster. A learning curve describes the effect: each time the number of repetitions doubles, the time per unit falls to a fixed fraction of its previous value. An 85 % to 95 % learning rate is common for construction tasks. The first unit takes the longest, so a bid on a repetitive building should price the first floors more conservatively than the later ones, or use an average over all units.

import math
# Learning curve for forming 8 identical floors (first floor takes 1,400 crew-hours)
T1, r, floors = 1_400, 0.90, 8
b = math.log(r) / math.log(2)
times = [T1 * n ** b for n in range(1, floors + 1)]
for n, t in enumerate(times, 1):
    print(f"Floor {n}: {t:7.0f} crew-hours")
print(f"Total {sum(times):,.0f} vs {T1 * floors:,} without learning "
      f"({1 - sum(times) / (T1 * floors):.1%} saving)")

Floor 1:    1400 crew-hours
Floor 2:    1260 crew-hours
Floor 3:    1185 crew-hours
Floor 4:    1134 crew-hours
Floor 5:    1096 crew-hours
Floor 6:    1066 crew-hours
Floor 7:    1042 crew-hours
Floor 8:    1021 crew-hours
Total 9,203 vs 11,200 without learning (17.8% saving)

With a 90 % learning rate, eight floors take about 18 % fewer hours than eight times the first floor. An estimator who prices every floor at the first-floor rate will be high; one who prices every floor at the eighth-floor rate will lose money. Learning is also interrupted by changes in design from floor to floor, crew turnover and long gaps between repetitions.

Equipment for the whole job

In a detailed estimate, some equipment is priced with the activity it serves: an excavator in the excavation package, a concrete pump on each pour. Other equipment serves the whole job and is priced on the schedule. Tower cranes, mobile cranes kept on site, hoists, forklifts and telehandlers, site vehicles, generators and temporary heating plants are usually carried in general conditions or in a separate equipment section, priced by the number of weeks or months they will be needed plus mobilization, erection, dismantling and operators.